A home loan is a long-term financial commitment. Comparing offers involves more than looking at the monthly EMI: you should also understand the down payment, total interest, fees, rate type and conditions attached to the property and borrower.
Understand the down payment
The amount you borrow is generally only part of the property’s total cost. Plan for your own contribution as well as registration, stamp duty, legal checks, moving costs, maintenance and an emergency reserve. The required margin depends on applicable rules, lender policy and the property.
Fixed and floating interest rates
With a fixed-rate structure, the rate may remain unchanged for the defined fixed period. With a floating-rate structure, the rate can change according to the benchmark and loan terms. Ask how rate changes affect your EMI or tenure and how often the lender reviews the rate.
Balance EMI and tenure
A longer repayment tenure can lower the monthly payment but may increase the total interest paid. A shorter tenure generally costs more each month. Test different scenarios using the same loan amount and interest assumptions, then choose a repayment level that leaves room for household costs and unexpected events.
Look beyond the headline rate
- Processing and administration fees.
- Legal, valuation and documentation costs.
- Insurance requirements, if any, and whether they are optional.
- Part-payment and foreclosure conditions.
- Late-payment charges and default clauses.
- Rate reset terms and the lender’s grievance process.
Before signing
Read the sanction letter, key fact statement and loan agreement. Confirm the rate, tenure, instalment date, fees, disbursement conditions and any property-related requirements. Ask the lender to explain anything you do not understand and keep copies of the documents.
Home-loan terms vary by lender and borrower. Verify current offers with the relevant bank or housing finance company and consider independent professional advice when needed.
Editorial note: This article is for general information only. Verify current rates, fees and eligibility with the relevant institution before making a financial decision.